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Welcome to the February meeting of the Program Evaluation Division
oversight committee. I'd like to welcome the House sergeant in arms,
Marvin Lee. Where are you Marvin? Someplace? There he is, over here.
Good afternoon Reggie. How are you sir? Nice to have you with us. Ray
Cook? Hello Ray. Joe Austin. Joe? He's on his way. And Mr. Crocker.
Okay, on the Senate side, I don't have a list. Do I? I don't
have a list. I see my friend C. Wilson. All right, well, we appreciate
you being here. We have a few people on their way, but we're gonna
get ahead, go ahead anyway. Pages, do we have pages yet today? I
don't believe so. No, okay. Couple of things before we get underway.
At the suggestion of Senator Hise at the January meeting, members of the
public may access the agenda containing hyperlinks. If you haven't
been on the website, there's a hyperlink on the agenda so you can
click and get all the documents that you, that back up whatever is going
to be heard. Each agenda item will contain weblinks, hard copies are in
the folders that have been distributed to members, and for future
meetings, hard copies will be available by request to members of the
committee, so they will be on your desktop and we're gonna try to
kill few, fewer trees. You will note that we do not have the Medicaid
reorganization bill on the agenda today. That was on purpose. Couple of
reasons, actually more than a couple. None the least of which is after
talking with a few of you, especially the new members on the House side,
we are not at all prepared to vote on this rather substantial
recommendation. Substantial is probably as small a word as I can find to
cover that. So there's been an inadequate time for members to
prepare. There are some new initiatives that are being pursued, and some
other pending and potentially conflicting initiatives, and a pending
state audit from the state auditor. Good place for state audits to come
from. So that's, so don't, don't believe that it's off
the table. It's just not on today's agenda. So with all that
said, I'd like to recognize Senator Hartsell for a few remarks.
None? Well in that case, first order of business is to approve minutes
from the January 21st meeting. Are there any corrections to those
minutes? Seeing none, do I have a motion to approve? Senator Clark,
seconded by Senator Hise, all those in favor say aye. Opposed no, ayes
carry it. And we ought move on now. We are rolling. Now let's keep
it up. Well, the next one is the draft legislation for review by
committee. Before I start that, I need you all to step up and volunteer
to be sponsors. Not every bill coming out of here should be, needs to be
sponsored by the committee chairs, so any of those, any of the bills
that we recommend for legislation, if you feel particularly inclined, we
would hope that you would say something to one of us and let you carry
the bill. That would be nice, but it is, it's also a committee bill,
so it doesn't count against your total if you happen to have a
total. But fewer bills, the better. I think we did some, over, over 2000
bills last year in the long session. So Wednesday, February 25th is the
bill deadline for introduction. The joint legislator program evaluation
oversight committee is qualified as a study committee, so these are all
study bills that come out of here. On January 21st, we recommended three
bill drafts listed on the agenda below. Therefore the staff will, will
not provide detailed review of these three bills. They will only explain
the purpose of the bill, note any changes, and respond to any questions
you might have. So after discussion with the chairs, after discussion,
the chair will entertain motions to recommend the bills for
introduction. So we'll begin with Lisa Wilks and Bill Graphine to
talk about revising the state child support initiative

that too. Thank you, Lisa.
[SPEAKER CHANGES]
Alright. Good afternoon. As Representative Warren mentioned, the two
drafts that I covered, the first of which was dealing with the Federal
Child Support Incentive payments, that draft, there were no changes
made. I'm not sure if you have any additional questions, this is
dealing with requiring the division of social services to retain up to
15% of the Federal Incentive payments for centralized child support
services, requiring them to revise the methodology of distributing
incentive payments to County Child Support Services programs and
requiring the development of a plan and reports on how incentive funds
are used. This was a recommendation from the subcommittee on child
support.
[SPEAKER CHANGES]
Questions from the committee relating to the draft? Do I have a motion
to authorize it for introduction? Senator Randleman.
[SPEAKER CHANGES]
So move, and also I'd like to sponsor the legislation.
[SPEAKER CHANGES]
If you would make a note on that. Okay, I have a motion from Senator
Clark on second, all in favor please say aye. Opposed no. Thank you,
Lisa.
[SPEAKER CHANGES]
Alright, and regarding the second draft, this second draft is dealing
with requiring the Department of Social Services and division of child
development to develop a plan requiring a custodial parent or, excuse
me, a custodial parent receiving childcare subsidy payments to cooperate
with County Child Support Services programs as a condition of receiving
childcare subsidy payments. There were no changes made to this
particular draft, however Senator Randleman had a question at last
month's meeting regarding whether the term or phrase "custodial
parent" also referred to, included references to other relatives,
such as a grandparent. I talked with Senator Randleman and it was not
clear to us that that definition or that phrase actually included that
term. In fact, I looked in the statutes, the term "custodial
parent" is not actually defined in statute as it related to child
support. Further, in looking on the federal website as well as our state
DSS website, it makes a reference to "custodial parent/custodial
party" or "custodian" with respect to the DSS website. So
it would be my suggestion that, to make it clear, and to go to Senator
Randleman's point, that we add some language in there if the intent
of the committee is to ensure that other relatives, such as a
grandparent, are included that we make that revision. I have copies of
the alternative draft here but as this was more than a technical change,
that draft is not before you but I have copies here if anyone would like
to see.
[SPEAKER CHANGES]
If we might, if we could distribute those. Representative Dollar.
[SPEAKER CHANGES]
Just a point of clarification, this does not, the change, which I guess
you're going to point out to us in a just a moment, that does not in
any way swerve in to the challenging waters of grandparent rights and
that sort of stuff. This doesn't have anything at all to do with
that, is that correct?
[SPEAKER CHANGES]
That's correct, no sir. This is just getting at making sure that how
it's defined, how "custodial parents," how other relatives
are already able to stand and receive child support payments that
it's just making it clear that it also applies to this legislation
and this situation as well. They're already able to, it's just,
it's not clear when you just look at the phrase "custodial
parent" that it also includes those other relatives.
[SPEAKER CHANGES]
Thank you.
[SPEAKER CHANGES]
So it's just clarifying it here. Does everyone have a copy of the
draft? Okay, so the changes are in three places. The first being, of
course, to the short title.

just to make it clear that it's a custodial parent or party. The
second being on line five, there's language added after the phrase
"custodial parent," "or other parent or other relative or
person with primary custody of a child. Then on line 16, that same
phrase is added after the words "custodial parent," it says,
"or other relative or person with primary custody of the
child." So those are the three changes, Mr. Chair.
[SPEAKER CHANGES]
Okay, thank you. Questions? Senator Hise.
[SPEAKER CHANGES]
Mr. Chairman, this may be a question of formality, would the motion be
in order to accept this as a substitute for the bill?
[SPEAKER CHANGES]
That probably is what makes sense, or yes. Yes, yes sir, and you so
move. Do I hear a second? Second by Senator Clark for this to be a
substitute for the original motion. Any discussion? All those in favor
please signify by saying aye. Those opposed no. The aye's have it.
We now have that substitute in front of us. Discussion ont he
presentatiion of the substitute? Seeing none, do I hear a motkion to
accept? Senator Randleman.
[SPEAKER CHANGES]
I move to present this as a an introduction and also to serve as the
primary sponsor.
[SPEAKER CHANGES]
Terrific. Thank you, Senator Randleman. Do I hear a, do we need a second
on that? No. No seconds required. Further discussion? All those in favor
signify by saying aye. Those opposed no. Aye's have it. Senator
Randleman, thank you very much for stepping up on that. Thank you, Lisa.
Next is Joyce Jones on the state ?? treatment facilities. Joyce, good
afternoon.
[SPEAKER CHANGES]
Good afternoon, Mr. Chair and members of the committee. I'll be
reviewing changes to the bill draft regarding recommendations on publicy
funded substance abuse services so if you have the blue drafts and bill
summary that are in front of you, that's what I'll be speaking
to. Under current law, North Carolina's public system for adult
substance abuse treatment has two primary components. The community
based system, which is managed by the LMENCO's who contract with
providers throughout the state for an array of substance abuse services
and then the three alcohol and drug abuse treatment centers that operate
under the division of state operated healthcare facilities to provide
inpatient substance abuse services. The bill draft that I summarized
last meeting integrates the state operated alcohol and drug abuse
treatment centers into the array of plublicy funded substance abuse
services managed by the LMENCO's. The bill draft also reallocated
direct state appropriations for the ADAC's to the division of mental
health, developmental disabilities, and substance abuse services and
strengthened the performance of managment systems for substance abuse
services. The change that I'll point out to you is in section three,
which begins on page two of the draft. If you flip over to page three,
it's really something that was deleted from the draft, so you're
not going to be able to see it but section three specifically directs
that all of direct state appropriations for the ADAC's are to be
terminated by the beginning of the 2019-2020 fiscal year. In the
previous draft there was specific direction as to how much the reduction
should, the amount of the reduction for each fiscal year of the
transition period. That language, at the request of Representative
Dollar, has been removed. That was the only change to the draft. I'm
not sure if anyone has questions?
[SPEAKER CHANGES]
Are there any questions from the committee? Representative Dollar.
[SPEAKER CHANGES]
I've got a question with respect to, I believe it's section 2B,
that has an April 1, 2016 date for the department to prepare and submit
to the HHS oversight committee a transition plan but in section 3B on
over it talks about some dates there, an August 1st date of this year,
2015 and a February 1st date of 2016 in terms of moving forward. So I
guess

I guess my question is, it would seem like we're going ahead and
making moves by a couple of dates certain, at least a couple of items by
dates certain, prior to the time in which the plan is actually scheduled
to be shared with the appropriate oversight committee and the general
assembly. So I'm just kind of wondering how, why we're doing
that and how that's envisioned to work.
[SPEAKER CHANGES]
Well, I'll defer to the program evaluation staff, but my
understanding of why those dates precede the date that the plan will be
submitted is to give the department the information they'll need to
actually develop the plan. So, for example, the division of mental
health is required to calculate and notify the LMENCO's by August
1st, 2015 of an estimated share of these fund allocations, so I believe
the intent is for that information to then be included in the report
that's submitted. So in other words, the department is getting
information beforehand so that they can have a complete report to
present.
[SPEAKER CHANGES]
Senator Pate.
[SPEAKER CHANGES]
Thank you, Mr. Chair. Ms. Jones, would you or someone else from the
staff know what the most recent allocation was to the three ADAC units?
[SPEAKER CHANGES]
I'll let Denis Thomas from Fiscal Research answer that question.
[SPEAKER CHANGES]
Denise?
[SPEAKER CHANGES]
Mr. Chair, Denise Thomas, Fiscal Research, Senator Pate, it's
approximately $40 million dollars for the three ADAC's.
[SPEAKER CHANGES]
Follow-up?
[SPEAKER CHANGES]
Follow-up, and so do we have a goal in mind for each of these three
years as I understand it, or will the ADAC's come in and make their
case for the appropriations that are necessary?
[SPEAKER CHANGES]
The only goal that's expressed in the draft, Senator Pate, is that
all direct state appropriations for the ADAC's will be terminated,
effective July 1, 2019 but the draft does not specify the exact amounts
each fiscal year that the reductions will be taken, just by July 1, 2019
they will terminate.
[SPEAKER CHANGES]
Further questions, Senator Hise.
[SPEAKER CHANGES]
I guess the question may be directed to Representative Dollar then, as
the one who kind of wanted that out and to put it as a direct cutoff, if
that's okay. Representative Dollar?
[SPEAKER CHANGES]
Yes sir.
[SPEAKER CHANGES]
What do you envision for this as we try to build out community services
and try to make services more available in local districts, what do you
envision as the budget reduction and the money put to those services up
through 2019 or do you envision this as a runs fully funded through 2019
and then just suddenly cuts off?
[SPEAKER CHANGES]
Well, no. Senator, I would agree with where you're going in terms of
doing it on a glide path but rather than have it laid out as specific
percentages, I just know that we're going to have a glide path,
we're going to have a plan that will be coming forward in that way.
We don't get sort of unintentionally caught up in having to meet a
certain percentage but I would certainly agree with you that you have to
start it and do it on a glide path. My concern was having specific
percentages but I think obviously the point is well taken. We've got
to make sure that we're making substantial progress toward that with
a end date that you all have laid out there.
[SPEAKER CHANGES]
So the question before the committee is should the joint committee
recommend this bill for introduction and if so I need a motion. Pardon
me? As amended, sorry. Senator Hise?
[SPEAKER CHANGES]
Mr. Chairman, I move for introduction as well as ask to be added as
sponsor.
[SPEAKER CHANGES]
Thank you very much. You all heard the motion. I don't think it
needs a second, is that right? Is that what we said before? Okay. All
those in favor signify by saying aye. Those opposed no. The aye's
have it and a bill will be prepared for introduction as amended. Mr.
Stanley. Thank you Joyce.
[SPEAKER CHANGES]
Thank you, Mr. Chairman, members of the committee, good afternoon. You
should have a copy of the bill and the summary, I'm told it's
canary colored, which I think is yellow. I was also told to be brief so
I'm going to be

But if you'd like me to go into more detail about any of this just
stop me and I'd be happy to do that. [SPEAKER CHANGES] Brief is
good. [SPEAKER CHANGES] Okay, the bill does four main things. First of
all it creates a task force on veteran service members and their
families in the Department of Administration. The second thing it does
is require that a subcommittee of that task force develop a strategic
plan that defines the state's vision and mission for veteran service
members and their families. Third thing it does is require state
agencies that provide a service, benefit or discount that is targeted or
directed at veteran service members and their families to collect and
report to the task force information about the number of persons served,
the type of benefit provided and the source of funding and the final
thing it does is create a new Joint Legislative Veterans and Military
Service Members Oversight Committee. The task of that committee in
addition to the normal oversight committees would be to review reports
by the task force that was created in this bill. I'd be happy to
answer any questions. [SPEAKER CHANGES] Thank you. Senator Pate.
[SPEAKER CHANGES] At the appropriate time, Mr. Chairman, I would
recommend that if we prepare this bill for introduction and I'll be
glad to sponsor it. [SPEAKER CHANGES] Terrific. Any further comments or
questions? Seeing none, Senator Pate this is the appropriate time.
[SPEAKER CHANGES] Move the following, that that draft be prepared for
introduction and we will discuss this later on. Thank you very much.
[SPEAKER CHANGES] Thank you, Senator. [SPEAKER CHANGES] Thank you.
[SPEAKER CHANGES] Motion before the committee is to prepare this for
introduction. All those in favor signify by saying aye. [SPEAKER
CHANGES] Aye. [SPEAKER CHANGES] Opposed, no. Ayes have it and we're
only five minutes behind. Next, review of first drafts of legislation as
instruction by the committee at our last meeting on January 21st.
Because the bills have been seen by the, the drafts have not been seen
previously, staff will explain each section of the bill and respond to
any questions. Yes, sir, Mr. Cherry. [SPEAKER CHANGES] Thank you, Mr.
Chairman, members, this is the Green Bill and the bill summary. This is
a pretty straightforward draft. As you know the report of the [??]
evaluation division found the different categories licenses processed by
DOI had different levels of effort but yet the same fee was charged, so
what we do in this bill, it only has one substantive section.
There's already statutory language that was in Article 2 of Chapter
58, which is the insurance statutes that gave the Department of
Insurance the authorization to contract for all kinds of online
services. What we've done is add language that says with respect to
contracts between their agent services division that relates to
processing of these licenses and applications that they can include a
fee schedule. Previously the existing section only says a reasonable fee
which kind of implies that they couldn't charge different fees for
different categories and we've simply made that clarification in the
statutory language and it gives them the option to do that. It
doesn't mandate that they do it. It will affect, if the next
contract for these kinds of online services. The current contract
that's in effect now, this bill is not intended to have any impact
on that. So, Mr. Chairman I'll be happy to answer any questions.
[SPEAKER CHANGES] Representative Dollar. [SPEAKER CHANGES] Refresh my
recollection, but as I recall this was the presentation that I believe
Michaux made on this. [SPEAKER CHANGES] Right. [SPEAKER CHANGES] And
DOI's good with it, everybody's happy with it and if that's
the case unless somebody just wants to sponsor it, I'll sponsor it
so somebody else don't have to. Unless somebody just wants to.
[SPEAKER CHANGES] We know of no opposition. [SPEAKER CHANGES] Seeing no
one jumping to the floor, Representative Dollar I greatly appreciate
that. I'll take that as a motion to approve. [SPEAKER CHANGES]
Motion to approve. [SPEAKER CHANGES] All those signify yes by saying
yes. [SPEAKER CHANGES] And no, no, and the bill passes and we move on
to, thank you very much, Mr. Cherry. Miss Turnau. [SPEAKER CHANGES]
Thank you, Mr. Chair, members of the committee. This draft is golden
yellow in your packet. This draft comes from Dr. Berner's
presentation from the School of Government. It requires the School of
Government

Speaker: Do you coordinate a working group to develop standards for
state agencies to guide evaluation of pilot projects? The school of
government is required to make a preliminary report to this committee,
the director of PED and the office of state budget and management by
December 1, 2015. The committee is required to provide feedback to the
school of government on the preliminary report, and then the final
proposed standards must be presented to the committee and to OSBN by
December 1 of 2016. OSBN is then required to adopt rules to implement
the proposed standards and to report to this committee upon adoption of
the rules. After June 1, 2017, all state entities are required to
conduct and complete pilot projects requested by the general assembly in
accordance with the standards adopted by OSBN. The school of government
is authorized to prepare and propose updates to the pilot project
standards as it deems necessary and must present those updates to OSBN
for review and adoption. OSBN has been required to report to this
committee on any changes to the rules. The school of government must
publish proposed updates to the standards on its website at least 90
days before the proposed standards are submitted to OSBN. This draft
also appropriates 150 thousand dollars from the general fund to the
school of government for the 2015, 2016 fiscal year to implement the
requirements of this act, and Mister Chair I'm happy to answer any
questions.
Change Speaker: Do we have any questions? See none. I do have, Senator
Heights, please.
Change Speaker: Real quick because it’s an appropriation area, which one
of the budget areas does the school of government fall under? is that
under the university system, or is that?
Change Speaker: I'm unsure; maybe someone from Fiscal has the answer
to that.
Change Speaker: Who can help us out?
Change Speaker: University.
Change Speaker: Denise?
Change Speaker: Yes sir, the school of government is at the University
of North Carolina, Chapel Hill.
Change Speaker: And your funding is through the University, and not
through some other--to your knowledge your funding is through the
University?
Change Speaker: To my knowledge, yes. I'm not on the ED team, so,
yes.
Change Speaker: Representative Hurley?
Change Speaker: I would like to help sponsor this, or if anyone would
like to help then I would be glad to do that.
Change Speaker: Great. Then can I take that as a motion to approve? Then
no further discussion. Motion to prepare this for introduction,
Representative Hurley will be the sponsor, all those in favor say aye,
those oppose no. The ayes have it, and we are rolling. Mister Hummel,
thank you sir.
Change Speaker: [inaudible 0:03:07.7] evaluation division [inaudible
0:03:10.4] controlled substances [inaudible 0:03:19.9] guideline to
continuing education requirements for health care providers.
Change Speaker: The performance of the Department of Health and Human
Services controlled substances reporting system is hindered by access
barriers, lack of data connectivity, and limited analytical capacity.
The lock in program, also administered by DHHS at the time was not
operational; it was costing MEDICAID program an estimated 1.3 to 2
million dollars annually. When it was operational, the program suffered
from several short comings. For the contract of the CSR lacked important
features and cost the state more for less functionality. And last, there
was no coordinated strategy or performance management system for
monitoring of use and prescribed controlled substances. At the time we
recommended that the state direct state officials and occupational
licensing boards to develop and adopt statewide opioid prescribing
guidelines, and requiring continuing education to prescribers who have
used controlled substances. Also recommended a series of improvement to
CSRS access and utilization. Also required modification of the contract
with Health Information Designs to improve CSRS performance and
functionality and to expand monitoring capacity established by the data
use agreements with the prescription behavior surveillance system.
Recommendations also--

Directed the Department of Medical Systems to improve the efficiency and
effectiveness of the Medicaid lock in program and establish a state wide
strategic planning and performance management system. Last session this
committee introduced a bill, Senate Bill 749, linked in your online
agenda, I believe, but some of us are already handing out written copies
of that. It was stopped in Finance Committee last session and this
committee has directed our division to come up with some recommended
changes based upon actions taken by various stakeholders affected by
this bill. According to section 1, based upon June 2014, North Carolina
Medical Board adopted more comprehensive opioid prescribing guidelines
that provide specific clinical guidance and information about board
expectations for patient management. We recommend modifying section one
to direct healthcare providers and occupational licensing boards adopt
the new opioid prescribing guidelines developed by the medical board. No
actions have been taken with regards to sections two and three,
therefore no modifications will be required. However, section four, DHHS
has established a new memorandum of understanding of the National
Association Boards of Pharmacy to participate in PNP interconnect.
They've also modified the HIA contract to include system feature, a
system feature requiring users to annually update their profiles,
process and validate user credentials, to provide quarterly deidentified
and identified data transfer of the NCCSRS database to the Department of
Health and Human Services. The modifications also include additional ad
hoc reports and four more standing reports. Therefore we would recommend
several changes to parts under section four. Based upon section five, no
action has been taken by DHHS so no changes are required. Section six,
the lock in program regained operation in November of 2014 and as if
March 2015 200 individuals will be locked in a year. We recommend a
modification of section six to require the audit date be changed to be
conducted within six months of the new legislation taking law. No action
has been taken as it relates to section seven, therefore no
modifications are needed. At this point I'd be happy to handle any
questions at the direction of the chair. [SPEAKER CHANGES] I'm happy
to take questions. Senator Tarte. [SPEAKER CHANGES] Yeah, thank you Mr.
Chair. At the appropriate time I move that we adopt and I would be happy
to be a prime on this. [SPEAKER CHANGES] Perfect. Any further questions?
Senator Hise? [SPEAKER CHANGES] I'd like to join on this bill as
well, please. [SPEAKER CHANGES] Great, adopt as amended, and we'll
get to that. This is something that's near and dear to my own heart
as a matter of fact and I wanted to also give a little bit of a shout
out to Senator Bingham. We worked on some of this a couple years ago and
how important this is as you all may know and you may have stated that
deaths from prescription drug abuse will soon, could soon be the number
one cause of death in North Carolina. This is a tragic issue across the
United States and I'm pleased to see North Carolina jumping to the
floor in it, so with that said. [SPEAKER CHANGES] So, let me also
mention, Mr. Chair if I might. [SPEAKER CHANGES] Yes, sir. [SPEAKER
CHANGES] Clark had a great deal to do with initiating this, the study
itself to begin with, because of issues that had arisen particularly in
Cumberland County in the military [??] [SPEAKER CHANGES] Right, so with
that said, Senator Tarte. Oops, wait a minute, Representative Hurley?
[SPEAKER CHANGES] I just have one question. On page three the quarterly
transfer, it says a quarterly transfer. [SPEAKER CHANGES] What line are
you on. [SPEAKER CHANGES] Seven. [SPEAKER CHANGES] Thank you. [SPEAKER
CHANGES] Start straight on seven, six. The quarterly transfer, a copy of
the complete CSRS database to DHHS, and I don't know, can you
explain that a little bit? [SPEAKER CHANGES] Sure, at the time of the
report we identified that this data that actually resides with the state
system data resides with the contract, that data never made it back to
the state therefore the state never had the capacity or the data to
actually be able to comb through it and do the analysis it needed to.
All of that was a portion of what the contractor was doing, so we
recommended that because other states also have that built into their
contract, the state actually retain the data that they're paying
for. [SPEAKER CHANGES] With that said, Senator Tarte, now is the time.

Mister Chair, my earlier comment please that we may adopt as amended.
[SPEAKER CHANGES]
As amended. Great. All those in favor of the motion, signify by saying
aye. Those opposed no. The ayes have it. I'm going to have to revise
how the, the wording's going to be, Senator Tarte, that we're
being asked to. Let's try that wording again here.
[SPEAKER CHANGES]
Update the bill.
[SPEAKER CHANGES]
Update, and revise.
[SPEAKER CHANGES]
And revise for introduction.
[SPEAKER CHANGES]
Update and revise for introduction. No problem with that? No problem,
consistent with what we have discussed. Senator Hise is the second no
problem and therefore, I think we're in good shape. Moving on.
[SPEAKER CHANGES]
Let's vote on it again, just in case.
[SPEAKER CHANGES]
Just to be careful then, let's, let's do vote on again. All
those in favor say aye. Those opposed no. The ayes have it, and we are
moving on. And we have Senator Tarte and Senator Hise and Senator Clark.
Great. Yes. And now we are at the list of committee recommended
legislation that did not pass out of the 2013, 14 session. And this is
a, a spreadsheet. When everyone has that in front of it, in front of
that, mister Turcott, please proceed.
[SPEAKER CHANGES]
Thank you, mister chairman. This is the white handout. It's
appropriate because I'm colorblind. I can't tell the difference
between pink and green and so forth. These are all bills that were
recommended by your committee previously but did not pass. On the
handout, you'll see the titles of, of the, of the short titles of
the bills before along with the bill numbers. The version online, there
are links directly to the bill sheets on these. The chairs are asking
you to review any of these bills that you as an individual member might
consider for introduction. These bills would not carry the
recommendation of the current joint legislative program evaluation
oversight committee. They were recommended by the previous committee,
but they would have to be reintroduced as individual bills, and the
chair is just, wants you to review them, any of them, and if you see fit
as individual members or a group of you, you can reintroduce these
bills. I'll be glad to explain any of the concepts behind any of
these bills at your direction, mister chairman.
[SPEAKER CHANGES]
If there are members requesting explanation of any individual bills,
please note. Senator Bingham.
[SPEAKER CHANGES]
Thank you mister chairman. I believe House, House Bill 1204 is one
I'd worked on in the past, and I, I, I don't know where, but I
guess it fell through the cracks somehow. But if you would touch on
that, I'd certainly appreciate it, John.
[SPEAKER CHANGES]
Yes, sir. Members of the committee, the series of reports that the
program evaluation did on, on the motor vehicle, on the motor vehicle
fleet, we found a consistent problem of, of agencies not tracking
mileage and use of these vehicles and what this, what this bill would
have done would require, would do if you reintroduce it, is it would
require the department of administration to implement a pilot project to
test use of telematics. Now, there has been, there was some language in
the appropriations bill, a special provision, requiring DOA, the motor,
motor fleet to work cooperatively with the information technology
services on a, a test of telematics. However, their study that they were
required to report on did not clearly show results of telematics. Now,
as I understand it they do have some data, they did develop some data.
One of the vendors has developed some data and they have actually
tested, but it was not formal, and you do not have the benefit of that
at this time. So what that bill, Senator Bingham, would have done, is
formalize all that. I think the agreement they came to, the DOA came to
was well, let's go ahead and test it anyway. We'll try it,
we'll try it, but they, once again we have a pilot project that
didn't

Speaker: It was not properly designed and you don't have the results
of that before you, even though there is some data available. So
that's the background on that, sir.
Speaker Change: Any further questions on any of the bills listed?
Senator Hise?
Speaker Change: Thanks. I thought we'd introduced it again last
session but I know from the beginning Senator Mansfield had begun work
on requiring all the agencies to replace their performance measures and
others. Was that introduced last time, or do we have a reference on that
bill?
Speaker Change: Mister Chairman, that bill was not a bill that was
recommended by this committee previously. That was a bill that former
Senator Mansfield first developed, i think you came back later on and
co-sponsored it, but I don't have that bill number, but it could be
re-introduced at this session. What it does is it sets up a what's
called a "taxpayer investment accountability board," It's
an ex-afficio board that would set up requirements for state agencies to
maintain consistent information, such as performance measures,
organization charts, logic models on their programs, program inventory,
that is a list of what they do. Efficacy of those programs, whether or
not they've been tested for evidence, while they have some promise
based upon research and the one serious provision of that bill is that
it would have made the agency heads liable on their bonds if they
didn't keep the information that was required, and an individual
taxpayer could walk in and say, "Well I’d like those performance
measures," and if the agency couldn't produce them then they
could be prosecuted for not having them. That was a pretty tough
provision, pretty stout. That's accountability on steroids. So,
that's that legislation. I recall a lot of it because I worked on
it.
Speaker Change: Any further questions? Senator Payton?
Speaker Change: Thank you Mister Chairman. I wonder if Mister Tercott
[SP]could speak on house bill 1036/senate bill 755?
Speaker Change: Yes, Senator Payton, we received a report from a state
auditor that was critical of a contracting procedures of DHHS and one of
the problems with one of the contracts was that the contract manager who
was overseeing the contract, I believe it was NC Tracks, left the job as
contract manager and went to work for the contractor within a matter of
days and was working on that contract, so the committee took a dim view
of that, agreed with the state order and requested legislation be
drafted to prohibit that practice. What that legislation does is it puts
a six month cooling off period on contract managers. It requires the
agencies to designate individuals who are responsible for contracts,
being contract managers, and it basically prohibited those contract
managers from accepting employment until six months post them departing.
There were other provisions of that act, but that was the substance of
it. Senator.
Speaker Change: Further questions? For these repeals that were--whoops,
I do have another question. Senator Bingham, thank you.
Speaker Change: Thank you Mister Chairman. Mister Chairman, this
telematics pileup that we've spoken up could not see an opportunity
to save this state a lot of money because in working on this in the past
and speaking with John about this, now that we have a school of
government setting up a process in which we can come up with something
that's sensible, you know, I'd like to not let this fall through
the cracks if we could.
Speaker Change: As I understand, all of the bills on these can be
introduced by individual members. You're all free to do that.
Contact drafting division and any of you want to get together, and make
sure that your teams are on them and we'd appreciate it and move
forward if Mister Tercott.
Speaker Change: Mister Chairman, one of the vendors that's working
with DOA did call me and offer to present results of some tests that
they've done. What I might suggest, mister Chairman, at one of our
future meetings have that vendor in to talk about results that they had
from the test that they--

Speaker: And I haven't seen it, I don't know what's in it, I
don't know whether the device’s were effective or not, but the
vendor did call in fact last week, i think there may have been some word
about this effort.
Speaker Change: We could then turn into one of our committee bills
perfect, let's get that on our agenda.
Speaker Change: Yes sir.
Speaker Change: Great.
Speaker Change: And if possible invite them for the next meeting.
Speaker Change: Yes sir.
Speaker Change: Any further comments? being none, as I said, these bills
are open for introduction by members and we hope you will take advantage
of that an we'll work on this one as part of a committee study.
Speaker Change: Right.
Speaker Change: Thank yoU Senator Bingham. Moving on now to PED report
on elimination of personal services contracts. Miss Con--coo--....I
apologize for my lack of pronouncing ability. [pause]
Speaker Change: Good afternoon Mister Chairman and members, my name is
Meg Kunyi [SP] and I am a program evaluator with the Program Evaluation
Division. Today I'll present a report; North Carolina should
eliminate the use of personal services contracts in favor of using
existing mechanisms. My presentation should take about 30 minutes after
which I would be happy to answer any questions at the direction of the
chair. You should have ion front of you a copy of today’s report and
todays slides. Sean Hamil and Doctor Pamela Taylor join me on this
evaluation team. We wanted to acknowledge the excellent cooperation we
have received from all North Carolina state agencies and University of
North Carolina constituent institutions, particularly the Department of
Administrations Division of Purchasing Contract, or PNC. The Office of
Information Technology services are OITS, the Office of State Budget and
Management are OSBM and the Office of State Human Resources or OSHR. Our
evaluation examines the states use of personal services contracts, which
administrative code defines as services provided by a professional
individual on a temporary or occasional basis, including those provided
by a doctor, dentist, attorney, architect, professional engineer,
scientist, or performer of the fine arts and similar professions. As
you'll hear during this presentation, this definition means
different things to different agencies. our report has five findings.
First, agencies have circumvented state law when procuring personal
services and have also compensated contractors at high rates. Second,
the state reporting requirement fails to capture the magnitude of the
use of personal services contracts. Third, executive branch agencies
have violated state law by not obtaining approval for IT personal
services. Fourth, the lack of a shared definition and process for
personal services contracts has led to erroneous procurement,
classification and reporting. Finally, personal services contracts are
unnecessary when existing mechanisms with greater oversight could be
used. To address these findings, the general assembly should prohibit
the use of personal services contracts, require all executive branch
agencies to obtain non-IT supplemental staff through the Office of State
Human Resources, and require state IT purchase to approve the
procurement of IT personal services contracts from individuals.
I will not provide some background information on the use of personal
services contracts and state government and how it fits into North
Carolinas overall structure of purchasing and contracting. In North
Carolina, central purchasing authority for all executive branch agencies
are vested in two entities; the department of administrations division
of purchase and contract, which oversees the procurement of non-IT goods
and services, and IT strategic sourcing within the Office of Information
Technology services which oversees the procurement of IT goods and
services. These agencies establish procurement rules and ensure
compliance with these rules. In general agencies must obtain approval of
state purchasing to enter into contracts for goods and services over 25
thousand dollars. However, administrative code exempts agencies from
having to obtain approval from state purchasing for personal--

Speaker: Services contracts, no matter the dollar amount, although
personal services contracts allow agencies to acquire short term
services without creating permanent positions, or obtain services that
might be difficult to recruit for state positions, all of this is done
without comprehensive state over sect. The personal services exemption
allows agencies to solicit personal services contractors in any manner,
including, by sole source without competitive bidding, select a vendor
based on internal criteria, negotiate the duration, terms, and amount of
the contract, and execute the contract without higher level state revue
or approval. Because of this latitude agencies are susceptible to
misusing personal services contracts. Our evaluation resulted in five
findings; first, agencies have circumvented state law when procuring
personal services and have also compensated contractors at high—
State law requires executive branch agencies to obtain approval from the
Governor and State Purchasing prior to procuring non-IT contracts for
consultant services. Consultant services are provided by individuals
with specialized knowledge who provide counsel, review and analysis.
According to administrative code, a personal service may also be a
consultant service, thus even though administrative code exempts
personal services from higher level review agencies must follow
consultant law if a personal services contract is of a consultant
nature. We identified 12 personal services contracts of a consultant
nature subject to the approval of state purchasing and the Governor in
fiscal year 2013. However, none of these consultant contracts were
submitted for approval as required by law.
Also, state law requires that retirees returning to work for the state
adhere to earning limitations in order to receive state retirement
benefits and have their earnings reported each month to the Department
of State Treasure by the Agency of Re-employment. We determined that
three retirees who performed contracted services in fiscal year 2013
received retirement benefits even though they exceeded their earning
limitation. in addition, only one of twelve retirees re-employed through
personal services contracts was reported accurately for every month
required and six were not reported at all. Currently the Department of
State Treasure does not have a way to verify whether agencies are
accurately reporting re-employed retirees, but it plans to develop a
compliance team to address this issue. In addition to violating the law,
agencies have compensated personal services contractors at states
exceeding the highest paid state executives.
Although state law does not limit the dollar amount agencies can pay for
personal services, a state procurement objective is to acquire suitable
services at the lowest possible cost, while ensuring open competition.
In order to calculate an annual equivalent salary for personal services
contractors, we took the contract amount and divided it by the number of
hours worked to get an hourly rate, and then we multiplied that rate by
two thousand hours, or 50 weeks of work. We found that from fiscal year
2010 to 2013, agencies compensated over 250 personal services
contractors at an hourly rate that, if they had been paid all year,
would have been equivalent to an annual salary greater than 164,150
dollars which was the average of the highest paid state executives in
state government in fiscal year 2013. Our second finding is although
reporting requirement for personal services contracts is the state’s
primary mechanism to monitor use, it fails to capture the magnitude of
the number and cost of personal services contracts and provides
insufficient oversight. Since 2001, state law has required agencies of
all three branches of government to report the use of personal services
contracts with annual expenditures greater than 25 thousand dollars.
OSBM then compiles an annual report on the type, number, duration and
cost of personal services contracts.
The exhibit seen here shows the number and total dollar amount of
personal services contracts reported from fiscal year 2008 to 2013. In
fiscal year 2013--

Agencies reported a total of 462 personal services contracts totaling
over 28.7 million dollars. Although the number of contracts reported to
OSBM has declined each year since the 2008 recession, the amount spent
on personal services contracts increased 14% from Fiscal Year 2012 to
2013. This indicates that agencies have spent more for a fewer number of
contracts. OSBM reports on the number and dollar amount of contracts
each year but it does not analyze trends in the use of personal services
contracts, or question agencies on any observable changes in use or on
the data they provide. Moreover, although directed to report on the
effectiveness of personal services contracts, OSBM has not done so since
March 2010. In addition, we found that the current reporting requirement
does not provide an accurate picture of the use of personal services
contracts statewide. To understand the magnitude of personal services
contracts captured by the reporting requirement in Fiscal Year 2013, we
requested each agency report the number and total dollar amount spent on
personal services contracts for less than $25,000 not reported to OSBM.
Although state agencies procured almost 15,000 personal services
contracts, the annual reporting requirement captured 3% of these
contracts and less than half of the 57.8 million dollars procured.
Our third finding is: Executive Branch agencies have violated state law
by not obtaining approval for IT personal services contracts and OITS
lacks the process to ensure compliance with the law. Although
administrative code exempts IT personal services from the approval of
State IT purchasing, the General Assembly enacted session laws in 2011
and 2013 to make it a requirement for agencies to obtain approval prior
to procuring IT personal services in any amount. The current review
process is designed to prevent agencies from procuring personal services
when they could be provided by State employees or through the IT short
term staffing program which provides staff to meet short term service
needs in categories such as software coding and integration at market
competitive rates. This statutory requirement will expire at the end of
this Fiscal Year, at which point administrative code will once again
exempt IT personal services contracts from higher level approval.
Although State law required agencies to obtain approval for IT personal
services during Fiscal Year 2013, we found that 95% of the IT personal
services contracts over $25,000 were not approved by state IT
purchasing. As a result nearly 1.7 million dollars was spent without the
required approval. At this time, State IT purchasing lacks a process to
ensure agencies follow the law. Although administrative code grants it
the authority, it did not conduct any compliance reviews during Fiscal
Year 2014 and has no plans to do so during 2015.
Our fourth finding: The lack of a shared definition for personal
services contracts has led to erroneous procurement, classification and
reporting. Recall that administrative code defines a “personal service”
as a service provided by a professional individual on a temporary or
occasional basis. Based on this definition we determined that a personal
services contract should meet all of the following three criteria.
First, the individual should be an independent contractor. According to
the IRS no employer/employee relationship can exist between the payer
and the independent contractor. This means the State can direct the
result of the contractor’s work, but not how that work gets done.
Second, the contract duration is for a temporary or occasional basis. A
temporary basis is typically understood as continuous work that lasts
less than a year. An occasional basis is understood to mean infrequent
periods of time throughout the year or for the duration of a task.
Third, the individual should have unique professional skills that can
only reasonably be performed by that individual. On this slide, you’ll
see the different ways in which agencies have defined and used personal
services contracts. Many of the arrangements do not meet the criteria I
just laid out.

For example, one agency contracted with a university instead of an
individual and called it a personal services contract. Other agencies
define supplemental staff as personal services contracts. Supplemental
staff are not independent contractors, but have temporary employments of
an employer/employee nature. Also, agencies have procured services that
do not require a particular individual to perform a specialized service
such as general administrative report. Further complicating matters,
PNC, OSBM and the Office of State Controller provide inconsistent
direction on the definition of a personal services contractor and
whether a personal service is with an independent contractor or of and
employer/employee nature. Agencies have also procured services from the
same individual for two to four years in a row rather than on a
temporary or occasional basis. Approximately 21% of the personal
services contracts reported to OSBM from 2010-2013 were for one year or
more of full time work rather than temporary work. When agencies
contract with the same individuals for the same service year after year,
it raises questions as to whether the service should be competitively
bid or whether it would be better to have a state employee perform the
service. Finally, our fifth finding is personal services contracts are
unnecessary because existing mechanisms with greater oversight allow
agencies to procure services from individuals on a temporary or
occasional basis. Given the misuse of personal services contracts
described, we identified several ways agencies could procure temporary
services from individuals through mechanisms other than personal
services contracts without losing purchasing flexibility. To do so we
recategorized the 462 personal services contracts over $25,000 reported
to OSBM in fiscal year 2013. Approximately 34% of the personal services
were procured by the judicial and legislative branches and the
University of North Carolina system, all of which are permitted by state
law to have separate purchasing policies and procedures. The other 66%
were procured by executive branch agencies, excluding University of
North Carolina constituent institutions. We recategorized these personal
services based on the scope of the work, deliverable and the individuals
performing the service. First, 6% of the personal services contracts
were recategorized as IT service contracts. If OITS determined the
requested service from an individual couldn't be billed through its
short-term staffing program or by a state employee, it could direct
agencies to use the process for an IT service contract. Second, 5% of
the personal services contracts could've been processed as non-IT
service contracts which are subject to the approval of state purchasing.
Third, 8% of the contracts were consulting contracts, subject to the
approval of PNC and the Governor. Fourth, almost 1/3 of the contracts
could've been billed through the Office of State Human Resources
Temporary Solutions Program. The program operates like a short term
staffing agency and retains professionals from various occupations such
as administrators, accountants and truck drivers. State agencies can use
the program to fulfil staffing needs during peak production and
transition periods. Finally, 15% of the contracts were recategorized as
supplemental staff because the services were of an employer/employee
nature and could not be filled through temporary solutions. In the next
couple of slides, I'll take you through how oversight entities will
be affected if executive branch agencies had used these five mechanisms
instead of personal services contracts over $25,000 they reported to
OSPM in fiscal year 2013. Since state law already requires OITS to
approve the procurement of IT services from individuals, its
responsibility would remain the same. However since only one IT personal
services contract reported to OSBM was approved in fiscal year 2013,
OITS should expect to annually review approximately 25 more requests
over $25,000. Next, PNC would see only a minimal increase in workload if
agencies were required to go through the process for service contracts
when acquiring services from

Speaker: Individual independent contractors. This means it would have to
review and approve approximately 22 more service contracts a year. In
regard to consultant services from individuals, PNC and the Governor
will continue to review requests as before. They should expect review
approximately 36 more consulting contracts each year if agencies follow
the proper approval requirements, which as stated they have failed to do
in the past. Without the option of using personal services contracts
however, agencies would have clear instruction that all non-IT
consultant contracts must be approved even if they are with individuals.
Approximately one third or almost 150 of the personal services could
have been provided through Temporary Solutions. Temporary Solutions has
processes in place to ensure staff are appropriately classified and
compensated. We found that the state could have saved almost one million
dollars in fiscal year 2013 if all executive branch agencies had used
Temporary Solutions instead of procuring personal services contracts.
Executive order four issued in February 2013 now requires cabinet
agencies to employ supplemental staff through Temporary Solutions but it
does not require the participation of counsel of state agencies. If the
general assembly required all executive branch agencies to submit
requests for supplemental staff to the Office of State Human Resources,
the state would have greater assurance that temporary staffing needs
were filled with the best qualified individuals for the most competitive
rates.
Finally, approximately 70 of the contracts were categorized as
supplemental staff. Aside from requiring agencies to give a staff a
break after 11 consecutive months of work, the Office of State Human
Resources has no other policies governing agencies used or compensation
of supplemental staff hired directly by the agency. The implementation
of guidelines could help the state streamline and monitor the use of
supplemental staff. Based on these findings we have three
recommendations. Because agencies are misusing personal services
contracts and agencies can acquire services from individuals through
existing mechanisms with greater oversight, the general assembly should
prohibit agencies from using personal services contracts.
Therefore, PNC and OITS should update administrative code to remove the
references to personal services. Moreover, the general assembly should
direct state purchasing to modify procurement manuals, to reflect the
changes in the law, and notify agencies of the changes. Lastly, the
general assembly should repeal the statutory reporting requirement of
personal services contracts. To be clear, prohibiting personal services
contracts would not take away an agency’s ability to respond to
immediate, short-term or unique service needs. Sometimes procuring a
service with an individual independent contractor is the best and most
efficient way to procure services and perform agency operations. That is
why we recommend simply redirecting agencies to use the existing process
for a service contract when procuring services from individual
independent contractors. This would streamline the process and provide
more state oversight. It would also prevent agencies from using the
problematic term, "Personal service." as a catch all for all
service needs.
In addition, agencies would maintain purchasing flexibility. For non-IT
services from individuals under 10 thousand dollars agencies would not
have to go through state purchasing. Over this amount the agency could
request a sole source justification if the individual has unique
qualifications. Another option is to request a special delegation if an
ongoing temporary or occasional service is necessary to perform agency
functions. Moreover, agencies can obtain verbal approval from state
purchasing when they need services in an emergency situation. Our second
recommendation is the general assembly should require all executive
branch agencies, including counsel of state agencies, to obtain non-IT
supplemental staff through the Office of State Human Resources Temporary
Solutions program. If an agencies supplemental staffing need cannot be
met through Temporary Solutions, the --

office of state human resources should direct agencies to hire
supplemental staff. Accordingly, the general assembly should direct
human resources to develop policies to guide how agencies hire and use
supplemental staff and to perform periodic audits to ensure agency
compliance. Lastly, for all uses of temporary solutions and supplemental
employment, human resources should be required to report biannually to
the general assembly and staff. Finally, or third recommendation is the
general assembly should enact legislation to require OITS to review and
approve service contracts with individuals. Because session law 2013 360
is set expire at the end of this fiscal year, the general assembly
should codify the law. This codification would continue state oversight
and require agencies to obtain approval from OITS and OSBM prior to
procuring IT services from individuals. This codification should include
several modifications. First, the language referring to personal
services should be modified to read "service contracts with
individuals." In addition, OITS should be directed to conduct
regular compliance audits and prepare a biennial report. In summary, we
found that agencies have violated state law when procuring personal
services, that the state provides insufficient oversight of the use of
personal services contracts and personal services contracts are
unnecessary when existing mechanisms can be used. To address these
findings, the general assembly should prohibit the use of personal
services contracts, require all executive branch agencies to obtain
non-IT supplemental staff through the Office of State Human Resources,
and require OITS and OSBM to approve the procurement of IT services with
individuals. As members of this committee, you have a few options in
response to the report. You can accept the report, refer it to any
appropriate committee, and/or instruct staff to draft legislation based
on any of its recommendations. This report, which includes a
consolidated response from OSHR, OSBM, and the Department of
Administration is available on our website and each entity has a
representative hear to answer any questions you might have. At the back
of our report you can also find a listing of the personal services
reported to OSBM in fiscal year 2013. Mr. Chairman, I'll now take
questions at your direction.
[SPEAKER CHANGES]
Thank you very much, Ms. ??. You'll also note in the report that
there was a response from one of the agencies, okay all the agencies. We
do have here as well someone from the Department of Administration that
may wish to add something before we open it to the committee for
questions, comments, etc. Does someone from DOA want to comment? Seeing
no desire for anyone to comment. The desire of the chair is that we have
some discussion. We can vote to accept or not. We can vote to have a
legislation drafted but I really don't want us to take specific
action, move forward, until we've had an opportunity for you all to
conjutate on it and we'll come back next meeting for action, if
there is going to be action by the committee. So you have an opportunity
to think about it, talk to whomsoever you wish, hear from others, and
then we'll see about some action. So first we'll start with
questions and comments from the membership. First was Representative
Dollar.
[SPEAKER CHANGES]
Thank you, Mr. Chairman. If I had made a recommendation today it would
be to reject the report, frankly, and that's nothing personal,
it's just that my long experience in and out of state government,
there are several things that I see quite problematic in here. One of
them is running all this stuff through temporary solutions. They are
wholly inadequate for the task. There's no question that one can
come up with more than one personal service contract that shouldn't
have been signed or was ill-advised or ill-supervised. Those things go
on, and it's also true that broader questioning of contracting in
the state of

North Carolina is something that needs quite a bit of work, frankly
legal work, but that's kind of a broader issue. We expect these
agencies, if you think about it, you just take the three largest
agencies we have, if they were actually independent businesses, they
would be among the five or six largest businesses in the state of North
Carolina. Nobody's as big as Walmart but you start coming down from
that and you're talking about the size entities that we're
talking about and I would not want us to say, "Okay, you're no
longer can do personal services contracts." Not that there's
certain things that shouldn't be tightened or you've got to go
through Temporary Solutions, which is wholly inadequate for the size
enterprises that we're talking about. So I think there's
significant questions there. I think if we did anything, what we
probably ought to do is to take the concerns that have been raised and
go to the agencies, both council of state as well as cabinet agencies,
as well as the university system, and say, "Okay, we have these
concerns, let's put a consortium together and let's come up with
some workable recommendations for fixing those problems that have been
identified and possibly other problems with personal services
contracts." I think if we attempt to dictate along the lines of the
recommendations that have been made, we're just making problems
much, much worse in state government.
[SPEAKER CHANGES]
Senator Pate.
[SPEAKER CHANGES]
Thank you, Mr. Chair. I believe the governor, the other night, was
speaking on his state of the state address about wanting to see
information technology services become its own department or separate
operating agency and I wonder how that might impact the findings in this
report.
[SPEAKER CHANGES]
One more, Senator Hise, hold on, Senator Tarte, you're next.
[SPEAKER CHANGES]
Thank you, Mr. Chair. A couple comments, first of all I would absolutely
echo Representative Dollar's position. There's no way I would
accept this as written right now. We've got a lot of work and
questions. It strikes me that first, is how do we find a balance in
accountability so these abuses don't continue to occur, at the same
time avoid adding just layers and layers of bureaucracy that slows down
the process. There's many things in this report that are troubling.
First of all, we make this statement that we have violated state law,
that in and of itself, I would love a list of what actual violations,
who and what dates, and what are we doing about pursuing violations of
law? How they occurred, is that a lack of knowledge of the rules or is
that willful noncompliance and those are very significantly different
issues, if we have that occurring. I also, like Representative Dollar,
to say that we're going to absolutely not allow and we're going
to prohibit these types of arrangements. It's hard to believe
they're never appropriate, based on the speed to contracting verse
normal RFP type processes. The other thing that struck me in this as
well is that if you look at is it appropriate that the purchasing
contract division is absolutely appropriate place and are they even
capable of taking on this work, particularly IT, with them hiring
general counsel. If you look at past state contracts, the IT, I believe
we have something, and I'm going to recall this and I'll be
wrong, but approximately 74 IT contracts that were 100% over budget and
50% past their due date and I would assume a lot of these and other
contracts were through the PNC. I don't think they have a
demonstrated track record to deliver and perform in this area and
I'm not sure, as an example, with the NC Tracks contract and talking
with one of the partners from Computer Science Corporation, as he stated
to me, why should the vendor be penalized for writing a completely
one-sided contract that is to their advantage? If we don't have
expertise to negotiate that kind of contract, we are in grave trouble to
be able to enforce this. That's just the start of where this goes. I
think there's things we absolutely need to do in this. One of the
last comments to make is the perception on slide 22 where we have the
general assembly, the judicial branch, and the university system not
subject to this, only the executive branch, it sure has a bad perception
that everybody else has to apply to the rules but us. I'm not sure
that's appropriate as well, so lots of questions, this is
absolutely, we've got these kinds of issues going on it needs to be
addressed but

I'm not sure this has got the answers. [SPEAKER CHANGES] Next is
Senator Hise. [SPEAKER CHANGES] Thank you, Mr. Chairman. A couple things
just to get out. I think that when we've come out with a
realization, and this isn't new to this committee report, it's
been in the newspaper all year and others, that agencies have
circumvented and violated the state law to procure personal services
contracts, then response from the General Assembly is necessary
that's coming forward, and I think we need to take some time to get
that right, but we've seem some large indications of, and the number
one reason often given is speed. We wanted to do it cause it was faster.
We can't wait for OSHR or OSIT to actually approve this or others
and a lot of these as they've shown are high dollar contracts going
to individuals that come in and we wind up with situations where we
doing build the state personnel necessary to operate systems in
government, we send it out to contracts and when the contracts are
terminated we have nothing to go back to and we wind up in a negotiating
position to extend that contract again for sometimes twice as much money
for another period. So these are things that are difficult on us, on the
state. I think there is also an issue here with OSHR purchasing
contract, OIPS, there needs to be strict timeline given that they must
respond with answers to agencies. There is no reason you should be
putting in a request for a reclassification of a position and waiting 60
days to get it done before you can hire the individual, before you can
post the job, before you can then go out and go through the interview
process and try and bring an individual into state government. When that
takes that long there's a push on state agencies to say oh, well we
can just do this as a partial service contract and we can have someone
in here in two weeks. So we have government bureaucracies that are
forcing agencies to go around state law and others because they have to
function and operate, so I think there's two sides of it that are
there, but I think we're going to have to approve some efficiencies
in the approval process, put some things in place, but you can't, I
don't care what the law is or how inefficient it is, you can't
have people just pop up and say this isn't working for me let's
try something else. That's not the nature of state law. [SPEAKER
CHANGES] Thank you. Representative Hurley. [SPEAKER CHANGES] Thank you,
Mr. Chair. I was just looking at, and as co-chair of Department of
Public Safety, I just wanted to know, there are several pages here. Can
you give me examples and if they are doing this and they're not
notified that once they did it one time there's not a trigger there
to let them know wait a minute, you shouldn't be doing this? Is
there not, is there training at all for the agencies? [SPEAKER CHANGES]
Currently there is contract training for agencies, but it's optional
to answer that question and in regard to all of the Department of Public
Safety contracts, many of those are actually supplemental staff that
were erroneously reported as personal services contracts. So they
actually have a different definition of personal service as somebody
who's not an independent contractor which is most of the other
agencies defined them as with independent contractors. [SPEAKER CHANGES]
Follow up? No? Any further comments or questions at this point? I would
like to commit PED for moving forward on this. We knew need, this is
something we've got to address. I don't think anyone in here
would disagree with that. There's been abuses. There's been
problems. We knew this was not gonna be a simple process of a couple of
bills and everything's find and dandy. We will get plenty of input
I'm sure from agencies that want to talk to us individually as well
as possibly come back and make some comments to our committee. I
don't wanna see this go away nor do I think that it should, but
there's apparent feeling on the committee that we need to proceed
carefully. With that I'd like to call on my Co-chair Senator
Hartsell. [SPEAKER CHANGES] Thank you, Mr. Chairman. I'd like to put
this in a little context if I might. We've been looking, this
committee has been looking at the issue of state contracting, the
personal services contracting, that sorta thing for at least five years
that I know of trying to get at least something where we have some
oversight and management of those and some legal review. The issue, and
this situation seems to me is not what it was

reject the report, with all due respect, it's a question is whether
we reject some of the recommendations from the report. The report is a
statement of what has been discovered and we may not like some of the
recommendations and, in fact, it's interesting, I note that the
governor's office has actually accepted some of these and they
approved some of them. So I'm not sure, I acknowledge that many of
these departments are larger than many corporations in North Carolina
but those corporations also have people who have lawyers who review
these things and we, apparently, have had limitations associated with
that because all this started when we've discovered that we
didn't have anybody who had, we couldn't even get a copy of the
state health plan contract from the vendor and we couldn't review it
and nobody looked at it and that was at least five years ago and so we
started, and sort of perpetuated some of the things we're trying to
clean this up. So, Mr. Chairman, I would liek to ask that we at least
accept the report and then work ont he recommendations because I think
the complaints and I think many of them are legitimate, please dont'
misunderstand me that we might we need to look back and review some of
those recommendations in the context of what has been suggested here
today. So I would move we accept the report.
[SPEAKER CHANGES]
A motion has been made to accept the report as presented. We can then
move on to how we deal with the recommendations but first, motion on the
floor to accept the report as presented. All those in favor say aye. All
those opposed no. The aye's have it. The report is accepted. Now,
from here, Representative Hise, or excuse me, Senator Hise, I
didn't mean to promote you.
[SPEAKER CHANGES]
Mr. Chairman, I know we've got a lot of questions about where were
going with this and I think ?? time the best may be to get a group
together and put us a subcommittee to work with the group to develop
legislation and hopefully have it ready for us at the next meeting,
something we can consider, but we've got a lot of viewpoints here
and drafting legislation's not that far outside our wheel well.
[SPEAKER CHANGES]
I couldn't agree more with that, without objection we'll appoint
a subcommittee of three of us, perhaps you would be willing to serve,
Senator Hise?
[SPEAKER CHANGES]
We would ask the Senator, Representative Dollar also.
[SPEAKER CHANGES]
I was going to ask Representative Dollar if he'd be willing to
serve. Senator Tarte, would you be willing as well? And we need one more
from the house and I would ask, Reprsentative Saine has volunteered so
we have four members, two frmo each house, to participate on the
committee to take a look at this, come back to us at the next meeting on
what recommendations they would have for action, right? Thank you very
much, very much, for your patience and your presentation, and now we
move on to Ms. Neno.
[SPEAKER CHANGES]
Okay, good afternoon Mr. Chairman and members of the board. My name is
Sarah Neno and I am a senior program evaluator in the Program Evaluation
Division. Today I'm presenting a report entitled "Implications
of Funding, Alcohol and Substance Abuse Treatment or Prevention With
Alcohol Tax Earmark." This presentation should take approximately
twelve minutes, after which I would be happy to answer your questions at
the direction of the chair. The report and slides are available online.
I served as the project lead for this study with key contributions from
Brent Lucas and Carol Shaw. We want to acknowledge the assistance and
cooperation we received from the Alcoholic Beverage Control Commission
and the department of health and human services. During today's
presentation I'll be referring to the Department of Health and Human
Services as DHHS and to the Alcoholic Beverage Control Commission as the
ABC Commission. The 2014 budget bill directed this committee to consider
examining the benefits and disadvantages of redirecting a portion of the
alcohol tax revenue from DHHS to the ABC Commission. In September 2014,
the committee voted to add this item to our work plan. Unlike most
program evaluation studies, this report does not include findings and
recommendations

Speaker: But instead is structured to provide information about how DHHS
uses the alcohol tax earmark, the ABC commissions plan to fund its new
underage drinking prevention program, and potential changes that could
make the ABC commissions program more effective. The ABC commission is a
receipt supported agency administratively housed in the department of
public safety. The commission is responsible for controlling all Aspects
of alcoholic beverage distribution and consumption. Last year North
Carolinas ABC store sales generated approximately 330 million dollars in
tax revenue for state and local governments. In Fiscal year 1314, local
ABC boards, county commissions, and DHSS received 14.7 million dollars
for alcohol and substance abuse treatment, education and research. So
the local ABC boards here, they receive 10.6, county commissions
received 2.7, and DHHS received 1.4 million and that earmark there is
the subject of this study today.
This study was prompted by a question from the ABC commission from the
general assembly to redirect this existing 1.4 million dollar alcohol
tax earmark away from DHHS and to give it instead to the ABC commission
to partially pay for the continuation of a new underage drinking
prevention program called "Talk It Out." After PED embarked on
the study, the ABC commission approved an increase in the bailment
surcharge to pay for the underage drinking prevention program and no
longer needs the DHHS earmark. Although the ABC commission has resolved
this funding issue, the general assembly may wish to consider a few
actions. First, consider directing the ABC commission to develop well
designed goals and targets, to gauge the success off the Talk It Out
program. The general assembly also may consider improving oversight for
the Talk It Out program and requiring formal coordination with other
state agencies.
I will now talk about how DHHS uses the alcohol tax earmark. As stated
earlier, each year DHHS receives approximately 1.4 million dollars in
earmarked funds. DHHS distributes these funds among nine regional local
management entities, manage care organizations. These organizations have
contracts with local providers to supply treatment services to
individuals with alcohol and substance use disorders. The earmark
provides care for approximately 290 people each year at an average cost
of 4800 dollars per person. Loss of the earmark would affect DHHS in two
ways; first DHHS would immediately lose 1.4 million dollars from their
budget for alcohol and substance abuse treatment. Second, the alcohol
taxes earmark is part of North Carolinas Maintenance of Effort, or MOE,
for the Federal Substance Abuse Prevention and Treatment block grant,
and maintenance of effort is a requirement that state funding for
substance abuse, prevention and treatment programs is sustained at its
existing level. Any reduction in the alcohol tax earmark would result in
a dollar per dollar reduction in the federal block grant, or another 1.4
million dollars, so if the alcohol tax earmark were redirected to the
ABC commission, DHHS would lose a total of 2.8 million fewer dollars to
spend on alcohol and substance abuse programs.
Now I will discuss how the ABC commission will continue funding its
underage drinking prevention program. The Talk it Out program was
launched in December 2014 and it consists of a variety of vivid TV,
radio and social media advertisements that seek to raise awareness about
the dangers of underage drinking and to encourage parents to discuss the
issue with their children. you may have heard or seen a talk it out
message on your local station; talk it out is the first large scale
underage drinking prevention program that the ABC commission has
undertaken. DHHS is supportive of the Talk It Out program and believes
that it may be complimentary to their own prevention efforts and that it
does not duplicate any existing state prevention programs. By devoting
resources to the Talk It Out program, the ABC commission has more than
tripled the amount of s--

State funding used for alcohol and substance abuse prevention. And we
thought you might want to see clips, so we included a clip today.
[SPEAKER CHANGES]
It's gonna be chilly today. I'm gonna have to bundle you up when
we take our walk. You want something to eat? I'm all ready for you.
What about some mashed bananas, huh? It's your favorite.
[SPEAKER CHANGES]
It's never too early to talk to your kids about the dangers of
alcohol.
[SPEAKER CHANGES]
Look what I have for you. Okay.
[SPEAKER CHANGES]
But it can be too late.
[SPEAKER CHANGES]
Just a little more
[SPEAKER CHANGES]
Today's the day to start the conversation and stop underage
drinking. Talkitoutnc.org
[SPEAKER CHANGES]
So clearly you're not gonna forget something like that when you see
it. The ABC commission is supported by a bailment surcharge that is
added to the cost of liquor that is sold in ABC stores. Today, the ABC
commission has spent about $2.3 million of its cash reserves on
developing the talk it out program, and that's been spent primarily
to hire administrative staff and to purchase advertisements. The ABC
commission estimates that in the future it will cost approximately $3
million a year to operate the program. In December 2014, the ABC
commission voted to increase the bailment surcharge from 80 cents to
$1.40 per case of liquor to fully pay for the program. I'm now gonna
talk about measures that the general assembly may wish to consider to
improve the ABC commission's efforts. PED's review of the talk
it out program revealed the lack of specific, well designed goals with
which to measure program efforts and a lack of targets to measure
progression towards the accomplishment of stated goals. Well designed
goals specify the outcomes or results the program hopes to achieve and
dates by which outcomes should be accomplished. Similarly, targets
provide milestones towards reaching an overall goal and indicate how
well program efforts are achieving a specific goal. PED reviewed eight
stated goals of the ABC commission's stated efforts, and each of
them could be better designed. For example, one of the ABC
commission's current goals is to increase the number of parents
discussing underage drinking with their children. As you can see, this
goal is missing numerical indicator to quantify success, and also is
missing a completion date. The PED example below shows what a well
structured goal would look like. By December 2016, the percent of
parents discussing underage drinking with their children will increase
by 25%. This additional information is important for the ABC commission
and for legislators to know in order to gauge how well the program is
accomplishing its stated goals. The talk it out program is entirely
funded, staffed, and developed by the ABC commission. In August, the
governor's substance abuse and underage drinking prevention and
treatment task force will receive a report on the talk it out
program's activities. However, the task force has no oversight or
evaluation functions. Talk it out is modeled after a well established
program in Utah called parents empowered. Utah's parents empowered
program is managed by an interagency council that approves all program
and expenditures, all programatic, you know, decisions and expenditures,
and receives an annual report on the use of funds, program impact, and
other results. During interviews with PED staff, Utah officials stated
that this coordinated oversight helps agencies avoid working in silos
and reduces duplication of effort. The ABC commission has engaged in
initial outreach efforts with local and state agencies to provide them
with information about the talk it out program, to explore areas of
commonality, and to learn about other prevention programs. However,
there is no formal requirement that the ABC commission coordinate
activities or communicate with other state prevention programs. Formal
coordination with other state agencies may leverage the state's
existing expertise in the development, implementation, and measurement
of alcohol and substance abuse prevention programs. During the course of
preparing this report, the program evaluation division suggested that
the ABC commission and DHHS consider developing a voluntary

memorandum of understanding. Such an agreement would dilineate how the
agencies will coordinate and collaborate on alcohol and substance abuse
prevention issues in the future and may address such issues as strategic
planning, communication, use of resources, and outcome measurement.
Originally, the ABC Commission sought the $1.4 million dollar alcohol
tax earmark to support its new underage drinking prevention program. The
ABC Commission raised its ?? surcharge to fully fund the Talk It Out
Program and no longer needs DHHS's alcohol tax earmark. The general
assembly may consider directing the ABC Commission to develop Talk It
Out Program goals and targets and improving program oversight and
coordination with other state agencies. As members of this committee,
you may accept the report or refer the report to any other appropriate
committees. DHHS and the ABC Commission have reviewed a draft of this
report and have representatives here today to answer questions. This
report is available online and includes comments from both agencies.
This concludes my presentation today. I'll be pleased to answer any
questions committee members may have at the direction of the char. Thank
you.
[SPEAKER CHANGES]
Thank you very much. Are there any questions from members of the
committee? Representative Hurley.
[SPEAKER CHANGES]
I don't really have a question, I just want to say I was at the,
when they started this and at the school where the students were and the
students saw the very graphic ads, which really does make you think, and
they are attention getting when you're watching television. And I
know this is not the funding that they they're going to be using but
the JPS Oversight Committee could oversee anything that they do and I
just, with this report, I mean that's what I understand, because
they're under us, the ABC Commission. So with that said, I just...
[SPEAKER CHANGES]
I'm sorry, I got lost here for a second. Did you ask her a question?
[SPEAKER CHANGES]
No.
[SPEAKER CHANGES]
Any other questions? Senator Hise.
[SPEAKER CHANGES]
One thing I want to say on these. First of all, I'm glad we're
off the block grant funds for the solution for this because taking away
the matcihng funds for treatment, you know, two-to-one damage kind of
coming out but the other concern I have and I think there is some
oversight, I think goals are necessary and outcomes, I think they need
to have an understanding of baseline of how many parents are having
annual conversation and then we can look at this program and see where
theyi move. Similar smoking programs across the nation have had very
questionable results as to whether they've had any impact on
actually reducing teen smoking or others, as impactful as the ads have
been and shocking, we don't knjow if they move the needle.
That's kind of coming in. One of the other requirements I think that
needs to be there is if we're going to spend money on this purpose
then we need to make sure its only spent on the purpose of promoting or
reducing teen drinking or encouraging parents to do that. You need to
kind of set those parameters. We've also seen in other programs when
they have a legislative source of funding, they sometimes like to switch
that advertisement to start saying contact your legislator and others to
make sure we continue to get our funding as they move forward.
There's one prominent that's kind of done that so I tihnk making
sure that that's there focus and that's there direction and
that's what they're approved to spend on may be important.
[SPEAKER CHANGES]
Thank you, Senator Hise. I recognize that Mr. Jim Gardner from the ABC,
Chairman of the ABC Commission is here, would you care to comment at all
on this, Mr. Gardner? Does anyone in the committee have questions for
Mr. Gardner? Nope. Hey, hey, hey, we like that. So I suspect that, oh,
I'm sorry, I'm sorry Representative Lucas, please.
[SPEAKER CHANGES]
No, it's not actually a question, it's just an observation, sir.
[SPEAKER CHANGES]
Okay.
[SPEAKER CHANGES]
I appreciate this report and it's a great need for the continuation
of this, especially as it relates to parental advice on prevention. In
my area, we've had a proliferation of parental promotion of teenage
drinking

Organized parties that have really led to violence, and kids been killed
as a result of this. And I just think that we, we, really need to hone
in on this.
[SPEAKER CHANGES]
Thank you Representative Lucas. I'm, I hear parents frequently
relieved to hear their kids are just drinking instead of just doing
drugs and I'm thinking, you don't get it. There's, there is
a significant problem, no question. Representative Dollar.
[SPEAKER CHANGES]
Just really briefly, I think that, and I'm sure I speak for a number
of people, that we should commend Governor Gardner for his efforts on
this. He's really taken it on as a long term cause to try to do what
we can to lower the incident of underage drinking and all of the deaths
and violence and other things that are, that adhere to that. And also I
think we would be remiss if we didn't thank the industry itself for
going along with some of the cost changes there that comes out of, come
out of their products basically, because the industry needs to
understand that it's responsible and it has a stake in this as well,
so I think we should have kudos to both.
[SPEAKER CHANGES]
Your comments are well received. I couldn't agree more that this,
one of those industries that really has stepped up to take their share
of responsibility and put their money where their mouth is. No question
about it. The, and Governor Gardner I apologize if I was impolite in not
recognizing you properly. I, that's the problem with moving here
from another state. You don't, I have no history and I'm kinda
lost in the wilderness so, what's new about that. Appreciate it. I
think the, the right action on this is this goes to appropriations.
That's who will be dealing with it, but we'll need a motion to
accept the report. Do I hear such a motion? I saw Representative
Lucas's hands and, hand up, and thank you very much. All those in
favor say aye. Those opposed no. The ayes have it, and we'll send it
with a notation on to appropriations. And right now we're down to
the, almost to the end. Mister Lucas.
[SPEAKER CHANGES]
Thank you mister chair. You should have in your packets a couple of
pieces of pink paper talking about the overnight respite pilot. My name
is Brent Lucas. I'm a program evaluator here with PED. Today I'm
gonna provide you an overview of our evaluation of a pilot program for
overnight respite at adult daycare facilities. Session law 2011 104
authorized DHHS to conduct a pilot of overnight respite of four adult
daycare facilities. The legislation directed us to determine the
perceived success of the pilot and the feasibility of continuing it.
Adult daycare facilities in North Carolina provide daytime services,
often referred to as respite services to the elderly or disabled for
caregivers. These services allow caregivers to take time, to take a
temporary break from the, from the pressures of providing care.
Beginning in late 2011, the pilot allowed four adult daycare facilities
to provide overnight respite, to provide respite services at night,
which was prohibited before the pilot. DHHS's division of health
services regulation administered the pilot and regulated the four pilot
facilities. DHHS also regulates other providers of overnight respite
care such as skills, skilled nursing facilities and assisted living
facilities. If you remember from our presentation in December, our
report had four findings. First, participants, caregivers, pilot
facilities, and DHHS perceived the pilot to be successful, but only,
only one pilot consistently provided overnight respite. In the report,
you'll see that our surveys, the surveys we conducted showed that
most of the 66 overnight clients and their caregivers were satisfied
with the service. However, we found that only one of the four, one of
the four pilot facilities consistently offered the service and one
didn't offer it at all. Our second finding was that the legislative
mandate for the overnight respite pilot and DHHS's implementation of
the pilot only met two of the ten recommended components of a well
designed pilot program. The implementation of these eight additional, or
these eight components would provide ya'll with useful information.
Our third finding is that the legislative prohibition against using
state or Medicaid funding for overnight respite in adult daycare
facilities hindered the effectiveness of the pilot. Although
Medicaid's innovations in community alternatives waivers already
fund overnight respite at other facility types such as skilled nursing,
the pilot's legislation specifically prohibited these sources from
being used to fund the pilot. The home and community care Block Grant
also couldn't be used as a source of funding. Thus, clients had to
pay for the service out of pocket. From our surveys of caregivers

in interviews with staff at the pilot facilities, we found that these
funding restrictions hinder the pilot. Our fourth finding was that,
although organizations affiliated with respite care have anecdotal
evidence supporting the need for overnight respite services, none have
empirical data to justify this demand. Since there was no data on this
demand for the service, we tried to get it ourselves with our surveys.
Our surveys of non-pilot adult daycare facilities show that they
estimate about 17% of their current clients across the state would use
the service for an average of twenty nights a year per person. Our
report also had two recommendations. Our first recommendation was to
allow the pilot program to expire on June 1st of this year, asset out in
its establishing legislation. Our second recommendation was to require
future pilot projects to adhere to standards established by UNC school
government. As I discussed earlier, the pilot could have been better
designed and implemented by DHHS. With this, we also propose three
alternatiev recommendations should the general assembly desire to
continue allowing adult daycare facilities ?? respite in the future. Our
first alternative recommendation would continue the pilot and it would
allow these four facilities to receive state and Medicaid waiver funding
for these services. Continuing the pilot in this way could provide more
information for you to make a decision later on. Our second alternative
recommendation would stop the pilot and would allow all adult daycare
facilities to offer the service with the approval of DHSR, but these
facilities couldn't receive state or Medicaid funding for the
service. Our third alternative recommendation would stop the pilot and
allow all adult daycares across the state to offer the service and they
could all receive state and Medicaid funding for it. After the
presentation of this report in December, the committee requested cost
estimates or fiscal analyses of each of your three alternative
recommendations. Deborah Landry from Fiscal Research has those analyses
ready for you all.
[SPEAKER CHANGES]
Please.
[SPEAKER CHANGES]
Good afternoon, Mr. Chair, members of committee. My name is Deborah
Landry and I'm with the Fiscal Research Division and I'm a
fiscal analyst with that division. I believe the handout you have is
pink for these slides also, if you want to follow along. Excuse me while
I put on my glasses. I'm not going to go over the alternative
recommendation, as Brent just already did that. I would like to go ahead
and give you some brief background on Medicaid as it's integral in
the analysis of this report. As Brent said, overnight respite is an
allowable service but only under a waiver program for Medicaid. North
Carolina does have the two waiver programs that currently cover
overnight respite, as mentioned by Brent. Innovations in community
alternatives program for disabled adults, or CAPDA, as I'll refer to
it in the rest of the report. The innovations waiver does allow
participants to receive respite in their own home or in a facility and
they also, important to this analysis to understand that every
individual has a budget under the innovations waiver and services must
be provided within that budget. The same goes for the CAPDA program.
They do allow in-home and overnight respite in institutions under the
CAPDA program and they also, participaints in that program have an
established monthly budget and all services must be provided to them
within that budget. Therefore, there is no anticipated Medicaid impact
if you expanded overnight respite to adult day health facilities. It
would just be adding another provider type that could provide respite
for Medicaid participants. To go over that, it's because only waiver
participants are eligibile, not all Medicaid participants, waiver
participants have the set budget, as I had mentioned. All waivers have
to have cost, or these particular waivers have cost neautrality and half
the number of participants that are eligible each year. They already
cover overnight respite in other settings and it would require amending
the waivers just to allow the provider to type. Medicaid referred to
that as a technical amendment to the waiver. The first alternative was
to extend the pilot as it currently exists and if you extended it as it
currently existed and allowed Medicaid funding there would be no
anticipated Medicaid impact based on what I just went over and also the
division of health service regulation, because they're doing it
right now already anticipate there would be no additional cost to them.
The'yre already assuming it under their current personnel. As we go
over the next couple of recommendations it's important to note that
the fees and the receipts that were estimated in this are based on adult
day health centers being treated just like adult daycare homes, and that
would be an initial fee of

Speaker: Fifty dollars, a construction fee which is a separate fee of
250 dollars, and a renewal fee yearly of 315 dollars. The alternative 1b
is to discontinue the pilot and allow all adult daycare facilities to
offer overnight respite provided they meet the current regulations. You
can see on here this is the health service regulations staffing cost
estimate, the receipts that are shown here are the licensors fees that
we just discussed. So the fees in year one are much higher because
they're the initial fee and the construction fee, and year two and
the ongoing would be the ongoing receipts. This is estimated that about
70 of [??] would come on board. There's about 101 facilities that
are adult daycare or adult day health. If they're going to accept
Medicaid it has to be an adult day health facility. We'll talk a
little bit more about the home [??] block grant later on which adult
daycare facilities could receive that funding. So this includes two
nursing consultants, an engineer or architect, and a processing
assistant, and this is yearly ongoing cost. The first year is shown
higher because of non-recurring costs of personnel when you first hire.
I think it's important to note that the pilot legislation required
that the adult day health facilities be inspected every six months.
Division of House Service Regulation inspects all other facilities
yearly, so this is an analysis that if you changed it from the pi lot
legislation of every six months, to the normal yearly inspection you
would actually need less staff and then there would be less cost for
that. So this brings it down to one nursing consultant and one engineer
architect, and you can see the cost there. Alternative on 1C says to
discontinue the pilot and to allow all adult care facilities to allow
overnight respite, and to collect Medicaid receipts. In this case, what
changes is the receipts for Adult Health Service Regulations would not
only be the [??] but they would be able to get Medicaid administration
and training for their staff and they have to do it based on the number
of Medicaid recipients that you'd be anticipated in those facilities
called a penetration rate that they would have to estimate. So
that's the main difference between this and the previous estimate
would be the addition of Medicaid receipts. I do want to then this
second would be the same issue of going from yearly inspections to every
six months.
The Home and Community Care block grant is a block grant that's
administered through the Division of Aging Adult Services and it goes
down to the local area agencies on aging. That block grant currently
does provide respite services. They are currently only daytime respite
services. You could expand the Home Community Care block grants
allowable services to include overnight respite. There would be no
additional funding requires, it would just mean that if people decided
to do overnight respite it would take away from other services being
provided. The Home and Community Care block grant decisions on what to
fund within the allowable services admitted at the local level. Every
county has a plan for their Home and Community Care block grant, and
then it's just administered through the area agencies on aging. They
would decide which of the services provide at what level. Just for your
information in the last fiscal year they spent about 400 thousand
dollars just on respite and again this would be just during the day. And
that concludes my report, I would be happy to take any questions at the
direction of the chair.
Speaker Change: Thank you very much Senator. Any questions from the
committee? Representative Dollard [??]?
Speaker Change: Just one quick question. So if you took the least cost
option in years two, three, four and five and out, that's about 61
thousand dollars which could be covered in the block grant, am I
understanding that correctly?
Speaker Change: Let me go backwards. So, in alternative 1C would be
allowing Medicaid and the licensure fees.
Speaker Change: You had a cheaper option.
Speaker Change: Yeah, no, I'm sorry. Thank you for pointing that
out, I meant to point that out. I need to make a correction and I'll
send the correction to PED. Your two should go all the way out; it's
just a formula problem in my cell. It should all be 129 all the way out.
I apologize for that.
Speaker Change: Well, whatever the cheapest option is.
Speaker Change: That's the cheapest option would be to allow
Medicaid because then health service regulation can pull in Medicaid
receipts for administrative and training. It's not Medicaid going
out to clients, it's their administration fees.

area for the state's portion. You would have to come up with state
dollars, correct? You couldn't use the block grant, or could you use
the block grant for that?
[SPEAKER CHANGES]
That's a good question and I'd have to get back with you on
that. Susan, Mr. Chair, Susan.
[SPEAKER CHANGES]
Susan.
[SPEAKER CHANGES]
Mr. Chair, Representative Dollar, members of the committee. You are over
matched in the block grant with state dollars. So one option would be
that you can reduce the amount of money going to the block grant to pay
for this service, which would be a net zero impact to your state fund
budget, and you would cover that effectively without new state dollars.
You'd just be using it for a different purpose. You wouldn't be
putting it in a block grant but you'd be putting it in to block
grant like services, which would be adult daycare or overnight respite.
[SPEAKER CHANGES]
Thank you.
[SPEAKER CHANGES]
Further questions? Being none, I think the action is that this go on to
appropriations. We also, I suppose we need to accept the report, so a
motion to accept the report. Representative Hurley. All those in favor
say aye. Those opposed no. The report is accepted and we'll send it
on with any recommendation or evaluation from appropriations, is that
correct? Apparently so. One piece of housekeeping, Senator Tarte, as an
advisory member of the committee you can't make that motion that you
made, so I'm going to have the motion made by Senator Hise, second
by Senator Clark, but we'll get you on the bill. Senator Tarte, go
ahead.
[SPEAKER CHANGES]
Mr. Chair, if you can check, I believe I have been added as a full
member, but if you can confirm, it's not a big deal right now.
[SPEAKER CHANGES]
Alright, we'll check, and if you are you are and you be the man.
I'm trying to see if there's anything else. We are going to meet
again on February, excuse me, March, February 23rd, so we will meet
again on February 23rd and hopefully we'll have a report from the
subcommittee and that way we make it in under the wire on the current
cutoff for submission of bills. Any further business to come before the
committee at this point? Seeing none, meeting adjourned at 3:39.